Contract interpretation: The “ordinary natural meaning” is perhaps wider than you think (Songa Tankers v Kairos Shipping)

Speedy Summary

On Monday the Court of Appeal handed down a half a million-dollar reminder of the principles of contractual construction (in Eng & Welsh law). It found that a clause entitling the Owner of a shipping vessel to “repossess the Vessel from the Charterers at her current or next port of call, or at a port or place convenient to them” did not entitle the Owner to require the Charterer to move the Vessel almost halfway around the world from Stockon (America) to Trogir (Croatia). That was notwithstanding that Trogir was the Owner’s home port, and so very “convenient to them”.

At first pass that might seem like the wrong outcome.  Understanding how the Court reached this conclusion offers valuable lessons for contract drafters, and those considering disputing their meaning. 

Drafters and litigators are now well familiar with ‘canons of construction’ (and there is an excellent recap of them at paragraph 25 of this judgment). The focus is usually on the “ordinary natural meaning” of the words. Even more so when interpreting a well-trodden standard form contract (like the Baltic and International Maritime Council charter standard terms in this case). And the Courts are asked specifically to guard against “searching for drafting infelicities in order to facilitate a departure from the natural meaning of the language used”.  The language of the clause quoted above seems unambiguous. So why were the Owners not entitled to elect any “port or place convenient to them”?

The answer becomes readily explicable when remembering that the “ordinary natural meaning” test does not simply focus on the specific sentence, or several words within a clause. As was said in Arnold v Britton: “The Court construes the relevant words of a contract in its documentary, factual and commercial context assessed in the light of, (i) the natural and ordinary meaning of the provision being construed; (ii) any other relevant provisions of the contract being construed; (iii) the overall purpose of the provision being construed and the contract in which it is contained…”

As explained in the further details below, zooming out from the specific wording in dispute, it was apparent that Clause 28 and 29 of this contract were intended to work together:

• Clause 28 entitled the Charter to terminate the contract with immediate effect upon the insolvency of the Owner or its Guarantor. 
• Clause 29 provided for the location where the consequential repossession of the Vessel should occur, where such entitlement had been exercised. 
• Clause 29 also provided that “The Owners shall arrange for an authorised representative to board the vessel as soon as reasonably practicable following the termination …[and it] shall be deemed to be repossessed … upon [that] boarding”.

Read in that light, it was apparent for a number of reasons (explained further below) that the third option of repossession “at a port or place convenient to them” was intended to facilitate the Owner’s obligation to put someone onboard to repossess the vessel “as soon as reasonably practicable”, not as a powerful right to entitle to Owner to select a port anywhere in the world and require the Charterer to sail to it. That conclusion is fortified by the context: the clause is triggered because the Charterer has terminated the contract with immediate effect. So the vessel would at that point be at a “current port” or headed to its “next port of call” without the benefit of the Charterers' obligations to operate, maintain, insure and indemnify because the contract has been terminated. It makes commercial common sense, therefore, to have a clause that allows for repossession “at her current or next port of call” or, if it better facilitates the Owners ability to take immediate possession of the now uninsured vessel “at a port or place convenient to them”.

A reminder, therefore, that the “ordinary natural meaning” test requires the interpretation of specific words in the context of relevant parts of the wider contract and its (objectively identifiable) intended operation. Focussing too narrowly on a handful of words, without that wider context, may lead to error.

Case: Songa Product and Chemical Tankers III AS v Kairos Shipping II LLC [2025] EWCA Civ 1227 (07 October 2025)

This article was written by Lloyd Nail and Amy Khodabandehloo in our Dispute Resolution team.

Further details

The dispute concerned the interpretation of clause 29 of the Baltic and International Maritime Council ("BIMCO") Barecon 2001 standard form of bareboat charter.

The key clauses (with our emphasis added) were:

Clause 28, which provided:

"Either party shall be entitled to terminate this Charter with immediate effect by written notice to the other party in the event of an order being made or resolution passed for the winding up, dissolution, liquidation or bankruptcy of the other party (otherwise than for the purpose of reconstruction or amalgamation) or if a receiver is appointed, or if it suspends payment, ceases to carry on business or makes any special arrangement or composition with its creditors. The Charterers shall have the same rights in case of a similar event in respect of the Guarantor."

Clause 29, which provided that in the event of such termination 

"…the Owners shall have the right to repossess the Vessel from the Charterers at her current or next port of call, or at a port or place convenient to them without hindrance or interference by the Charterers, courts or local authorities. Pending physical repossession of the Vessel in accordance with Clause 29, the Charterers shall hold the vessel as gratuitous bailee only to the Owners. The Owners shall arrange for an authorised representative to board the vessel as soon as reasonably practicable following the termination of the Charter. The Vessel shall be deemed to be repossessed by the Owners from the Charterers upon the boarding of the Vessel by the Owners' representative. All arrangements and expenses relating to the settling of wages, disembarkation and repatriation of the charterers' Master, officers and crew shall be the sole responsibility of the Charterers."

The dispute centred on the wording in bold and underlined. 

• The Charterer wanted the Owner to repossess the Vessell at Stockton (California), which was their next port of call. 
• The Owner wanted to repossess it in Trogir and said they were entitled to insist that the Charterers did this because the clause says “at her current or next port of call, or at a port or place convenient to them” and Trogir was convenient to them. 
• It was not disputed that the trans-Atlantic voyage to Trogir would have taken well over 37 days (the time for passage from Mexico to Gibraltar) and cost at least USD 500,000.

The Court found that clause 29 did not entitle the Owner to require the Charterer to move the Vessel almost half-way around the world.

Reasons for the outcome:

The core of the Court’s reasoning comes in the leading judgment of Lord Justice Philips from paragraph 41 onwards. In particular:

“In my judgment the legal and commercial features of a bareboat charter are indeed highly relevant to understanding the meaning of the provisions of clause 29…. In each of sub-clauses 28(a), (b) and (d) the termination is expressed to be "with immediate effect by written notice" (termination being deemed when the Vessel is an actual or constructive loss under clause 28(c)). The result of such termination, whichever of those sub-clauses is triggered, is that the Vessel ceases to be at the disposal of the Charterers and they cease to be under any obligation to pay hire to the Owners, or to operate, maintain or insure the Vessel. Neither are the Charterers liable to indemnify the Owners for loss, damage or expense in relation to the Vessel. In those circumstances it is a legal and commercial imperative that the Owners, whose Vessel is no longer on hire and is without the benefit of the Charterers' obligations to operate, maintain, insure and indemnify, should have the right to repossess it at the first opportunity, namely, at its current port (or its next port of call, if at sea) and that the Charterers should have a minimum obligation to care for the Vessel as gratuitous bailee in the interim. The quid pro quo for that obligation of the Charterers must be that the Owners should repossess the Vessel as soon as reasonably practicable so as to relieve them of that unremunerated burden.

“It can be seen that that imperative is duly given effect by the first three sentences of clause 29, subject only to the meaning and effect to be given to the additional words "or at a port or place convenient to them" in the first sentence. The question is whether those words entitle the Owners, even when the Vessel is currently at a safe and readily accessible port, to elect to repossess the Vessel at a far distant port "convenient" to them, with a corresponding implied obligation imposed on the Charterers to sail the Vessel to that port as gratuitous bailees at their own up-front cost. In my judgment there is no such broad entitlement, for the following reasons….”

Paraphrasing the judges’ longer explanations of these reasons:

[1]The parties could have included an express right – a right for the Owner to nominate any location for taking repossession – in so their right to do so was clear. There was no such term.

[2] The first part of clause 29 says "her current or next port" which would carry little or no weight if what was really intended was unrestricted right for the Owner to select any port.

[3] "…her current or next port" is not part of a “menu of options” but intended to further the purposes of clauses 28 and 29 together. It reflects the fact that the Vessel may be in port at the time of termination (“her current port”) or may be at sea (heading for her “next port”).

[4] Clause 29 should be read as an entire clause. The right to repossess the Vessel (as bestowed on the Owners via the first sentence) should be read in the light of, and together with, the obligation imposed on them in the third sentence to place a representative on board “as soon as reasonably practicable”. 

[5] Read in the above context, it makes more sense to read “or at a port or place convenient to them” as being a ‘third option’ only where necessary to facilitate the Owner's obligation to place a representative on board as soon as reasonably practicable, where that isn’t the Vessel's “current or next port".

[6] Converserly there is "necessity for, and serious obstacles to, implying a broad obligation on the Charterers to set sail from a safe accessible "current port" to a distant port". In particular, it would be at the Charterers expense and risk (i.e. needs to be insured) in circumstances where – because the clause has been triggered by the Owner and/or Guarantor's insolvency – the Charter knows “the Owners or their guarantors may not ‘be good for’ any … obligation to indemnify them” (e.g. for their reasonable costs incurred in moving the vessel as a ‘gratuitous bailee’).